A Short Note on the Tobin Tax: The Costs and Benefits of a Tax on Financial Transactions

Almost each time volatility in equity, debt, or currency markets increases, there are cries to introduce a tax of financial transactions, first proposed in Tobin (1974).

Author(s):

Raman Uppal

Professor of finance, EDHEC Business School.

This tax is motivated by the view that the excess volatility in financial markets is the result of trading by speculators"; thus, even a small tax on financial transactions would "throw some sand in the wheels" of financial markets, and hence, by slowing down the trading activity of speculators would reduce volatility. In this position paper, Raman Uppal, professor of finance at EDHEC Business School, discusses the costs and benefits of such a tax on financial transactions.

Type: Position paper
Date: le 12/07/2011
Research Cluster : Finance

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